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In this list

Performance of Capital Markets in India Since Demonetization

S&P Global Ratings

COP24 Special Edition Shining A Light On Climate Finance

S&P Dow Jones Indices

Considering the Risk from Future Carbon Prices

S&P Global Ratings

Plugging the Climate Adaptation Gap with High Resilience Benefit Investments

Empowering Public Private Collaboration in Infrastructure

Performance of Capital Markets in India Since Demonetization

On Nov. 8, 2016, Mr. Narendra Modi came on national television and announced that at the stroke of midnight, 500 and 1,000 rupee notes would no longer be legal tender. These notes constituted 86% of the total currency in circulation. This announcement was by far one of the boldest economic decisions taken in recent years. The rationale for this unexpected decision was to remove counterfeit currency notes from the system, end the parallel black market economy, and digitize the Indian economy.

One year later, the topic of demonetization is still being discussed and debated across the length and breadth of India. While many support this bold move, there are others who criticize it. Wherever this debate goes, it’s easy to see that capital markets in India have been on a roll over the past year and have given exponential returns across size, segments, and sectors.

In this blog, we will analyze how capital markets in India have performed since the demonetization announcement was made in November 2016.

Exhibit 1 and Exhibit 2 showcase the one–year, post-demonetization returns for the four leading size indices in India.

Exhibit 1: One-Year Absolute Returns of Size Indices

Source: S&P Dow Jones Indices LLC. Data from Nov. 8, 2016 to Nov. 8, 2017. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

Index Index Value on Nov 8, 2016 Index Value on Nov 8, 2017 One-Year Absolute Return (%)
S&P BSE SENSEX 38829 47355 21.96
S&P BSE Large Cap 3875 4773 23.19
S&P BSE Mid Cap 15010 19239 28.17
S&P BSE Small Cap 15093 20384 35.05


From Exhibits 1 and 2, we can see that all four indices have given high returns. Returns have been promising for large-, mid-, and small-cap segments. The returns of the small- and mid-cap segments have been better than the large-cap segment. The S&P BSE SmallCap and S&P BSE MidCap gave one-year absolute returns of 35.05% and 28.17%, respectively, while the S&P BSE LargeCap and S&P BSE SENSEX gave returns of 23.19% and 21.96%, respectively.

Exhibits 3 and 4 showcase the one-year, post-demonetization returns for the 11 leading sector indices in India.

Exhibit 3: One-Year Absolute Returns in Sector Indices

Index Index Value on Nov 8, 2016 Index Value on Nov 8, 2017 One-Year Absolute Return (%)
S&P BSE Realty 1,585.00 2,489.31 57.05
S&P BSE Energy 3,566.92 5,208.17 46.01
S&P BSE Telecom 1,204.51 1,721.65 42.93
S&P BSE Basic Materials 2,983.78 4,118.34 38.02
S&P BSE Finance 5,213.94 6,828.34 30.96
S&P BSE Utilites 2,070.98 2,653.96 28.15
S&P BSE Consumer Discretionary 3,624.96 4,605.44 27.05
S&P BSE Industrials 3,423.10 4,187.83 22.34
S&P BSE Fast Moving Consumer Goods 10,524.51 12,784.46 21.47
S&P BSE Information Technology 11,837.65 13,186.50 11.39
S&P BSE Healthcare 16,696.51 15,454.32 -7.44

Source: S&P Dow Jones Indices LLC. Data from Nov. 8, 2016 to Nov. 8, 2017. Past performance is no guarantee of future results. Table is provided for illustrative purposes.



From Exhibits 3 and 4, we can see that barring one index, all sector indices have given positive returns. The S&P BSE Realty gave the best one-year absolute return of 57.05%, followed by the S&P BSE Energy and S&P BSE Telecom, which had one-year absolute returns of 46.01% and 42.93%, respectively. The S&P BSE Healthcare was the worst-performing index, with a return of -7.44%.

To summarize, we can say that the bulls have had their way during the 12-year period since the announcement of demonetization was made, and indices across various size segments and sectors have given exponential returns.

COP24 Special Edition Shining A Light On Climate Finance


− Green loans are evolving, with the Climate Bond Initiative forecasting nearly $1 trillion in green bond issuance by 2020.

− Despite the uptick in green bond and loan issuance, the market still remains relatively small, especially compared to the universe of assets comprising CLO 2.0 transactions.

− In our view, a green CLO market has large growth potential, boosted by regulatory initiatives and emerging interest from both issuers and investors in 2018.

− We built a hypothetical rating scenario for a green CLO to compare and contrast the underlying portfolio and structure with a typical European CLO 2.0 transaction.

− Our hypothetical green CLO analysis showed that green loans may have different fundamental characteristics to corporate loans, such as lower asset yields, higher credit quality, and higher recovery rates assumptions.

The global collateralized loan obligation (CLO) market has experienced a rebirth (2010 in the U.S. and 2013 in Europe). New issuance continues to increase due to investor familiarity with the product, as well as low historical default rates. While a market for green assets, such as green loans and bonds has been established for a while, although still of a relative size, a sustainable securitization market is still in its infancy. Considering the challenge in financing the amounts, S&P Global Ratings expects green CLOs to play a role in increasing the private sector presence in the sustainable finance market.

Following the Paris Agreement that came into force in November 2016, 184 parties have ratified the action plan to limit global warming. For this purpose, developed nations have pledged to provide $100 billion (about €87 billion) annually until 2025. As part of this deal the EU has committed to decrease carbon emissions by 40% by 2030. In March 2018 the European Commission (EC) proposed the creation of environmental, social, and corporate governance 'taxonomy', regulating sustainable finance product disclosures, as well as introducing the 'green supporting factor' in the EU prudential rules for banks and insurance companies.

Read the Full Report

Considering the Risk from Future Carbon Prices

Along with the advent of the 2015 Paris Climate Agreement has come a growing understanding of the structural changes required across the global economy to shift to low- (or zero-) carbon, sustainable business practices.

The increasing regulation of carbon emissions through taxes, emissions trading schemes, and fossil fuel extraction fees is expected to feature prominently in global efforts to address climate change. Carbon prices are already implemented in 40 countries and 20 cities and regions. Average carbon prices could increase more than sevenfold to USD 120 per metric ton by 2030, as regulations aim to limit the average global temperature increase to 2 degrees Celsius, in accordance with the Paris Agreement.

S&P Dow Jones Indices launched the S&P Carbon Price Risk Adjusted Indices to embed future carbon price risk into today’s index constituents.

Read the Full Report

Plugging the Climate Adaptation Gap with High Resilience Benefit Investments


- Adaptation financing needs to substantially increase to address the higher impact of extreme weather to society due to climate change.

- Adaptation projects are typically cost effective and bring wide range of resilience benefits.

- To demonstrate the value of resilience benefits to various stakeholders we consider that it is important to quantify those benefits based on a robust modeling framework.

- We expect that due to the large size of the adaptation gap and constrained public finances,private investment would need to make a considerable contribution to adaptation financing.

Dec. 07 2018 — We believe the recent surge in economic damage from extreme climatic events may focus the attention of public authorities about the need for adaptation investments and accelerate investment in this area.The United Nations Environment Program (UNEP) forecasts adaptation costs in developing countries at between $140 billion and $300 billion by 2030, and $280 billion and $500 billion by 2050. That is approximately 6x-13x above the amount of international public-sector finance available today--just to meet 2030 costs.

Over the last two years,the world has seen a flurry of extreme weather, which has exposed the vulnerability of many countries to these events. Climate change may make matters worse, irrespective of whether we manage to keep global warming to 2 degrees Celsius or not. Attention to climate change adaptation is therefore increasing, especially about how to finance it, given the need to raise enough public and private investment to fortify exposed countries and communities against the potentially devastating effects of physical climate risk.

Read the Full Report

Watch: Empowering Public Private Collaboration in Infrastructure

S&P Global CEO Doug Peterson speaks with Maha Eltobgy from the World Economic Forum, on their joint study that looks at how greater collaboration between the public and private sector can accelerate national infrastructure programmes.